Italtile feels the pain

Italtile expects its earnings to drop significantly for the year through June 2024, attributing this decline to the high cost of living for South Africans.

Italtile released a trading update this morning informing shareholders that its earnings per share (EPS) could drop by as much as 11%.

“In the year ended 30 June 2024, the increased cost of living weighed heavily on consumers,” the company said. 

“Homeowner confidence remained subdued in light of sustained high interest rates and inflation, and demand was at low levels across the industry. In the context of low GDP growth and weak consumer sentiment and spending, the building cycle downturn has yet to recover.”

Italtile said its retail division’s full-year results were 4.7% lower than the prior comparable year. Its retail brands are CTM, Italtile Retail, and TopT.

The division recovered market share and performed better in the second half of the period than in the first half.

However, its full-year like-for-like sales still decreased by 2% compared to the prior period, and the average selling price inflation was 2.1%.

Ceramic Industries continued to fight for market share in the difficult environment. 

Despite efficiency improvements in manpower, systems, quality, and products, the business was not able to grow tile volumes and improve capacity utilization to leverage economies of scale, which continued to negatively impact Ceramic’s contribution to the group’s results. 

Ceramic and Ezee Tile’s combined manufacturing sales decreased by 6% in value in the year. 

While Ceramic reported lower volumes and profits, Ezee Tile grew both metrics after completing the commissioning of the new Vulcania facility. Combined average manufacturing selling price inflation was 1% for the period.

In the integrated supply chain, Italtile’s import businesses, International Tap Distributors, Cedar Point, and Distribution Centre, collectively reported an increase in sales value of 2%, with average selling price inflation of 3.7%.

The company said its consolidated gross margin declined by 2.6%, in line with its “efforts to support affordability for customers and compete for market share in the context of subdued demand and increased competition”.

“In the year ahead, our focus will remain on gaining market share and executing operational excellence across our retail and manufacturing assets to improve competitiveness, drive growth, and enhance our industry-leading position,” the company said.

Italtile said shareholders can expect EPS and headline earnings per share (HEPS) to be in the range outlined below:

Italtile attributed the disparity between EPS and HEPS to impairments of R15 million recognised on property assets during the year.